Market Report: Fears of further writedowns haunt financials

For free real time breaking news alerts sent straight to your inbox sign up to our breaking news emails

Sign up to our free breaking news emails

Please enter a valid email address

Please enter a valid email address

SIGN UP

I would like to be emailed about offers, events and updates from The Independent. Read our privacy notice

Bears reigned in the banking sector yesterday, driving financial stocks down despite a positive results statement from HSBC.

Credit Suisse triggered the alarm in the morning, citing the increased likelihood of further writedowns at UBS, which they reckon may be as high as SFr15.5bn (£7.5bn). The situation was made worse in the afternoon, when rumours of large trading losses at Deutsche Bank began to circulate in the market.

Investors spooked by the prospect of fresh banking skeletons soon sold out of the sector.

HBOS, which was dealt an additional blow by analysts at Bear Stearns, who downgraded it to "peer perform" from "out-perform", was the worst of the lot. Its shares plummeted by more than 7 per cent or 45.50p to 558p, firmly lodged at first place on the loser board.

Alliance & Leicester, the second worst performer on the FTSE 100, lost 38p to 525.50p, while Royal Bank of Scotland, which lost 15.75p to 369.25p, was the seventh worst stock.

Others to lose ground in the sector included Barclays, which shed 15.25p to 462p, Lloyds TSB, which lost 9p to 444.5p, Standard Chartered, which fell 43p to 1,631p, and the FTSE 250-listed Bradford & Bingley, which lost 20.5p to 204.50p.

The worries went beyond banks, and hedge fund Man Group was lighter by 23p at 532p, while insurance group Friends Provident was down 6.50p to 127p.

Overall, the FTSE 100 recovered from an early, intra-day low of 5,770.10 to close at 5,818.60, down 65.7 points.

The recovery was sparked off by the American Institute for Supply Management's manufacturing index, which registered a reading of 48.3 for February: stronger than the 48.1 reading anticipated by many in the market.

While better than expected, the news still signalled a contraction in US manufacturing activity (growth is signified by a reading above 50) and failed to lift the markets out of the red. The FTSE 250, which touched an intra-day low of 9,953.70, closed down 54 points at 10,013.90.

Elsewhere, private equity group 3i was upgraded to "buy" from "neutral" at UBS. Analysts at the bank think that the diversity of 3i's 420 investments endows it with "defensive qualities with relatively low company specific risk". And while positive sentiment was also forthcoming from Dresdner Kleinwort, which reiterated its "buy" rating, the company's shares closed down 21.50p at 796p.

On the FTSE 250, Expro lost 49p to 1210p as investors indulged in some profit taking following last week's bid approach.

Weekend reports indicated that European private equity firm Candover may be the suitor behind the approach which could value the company at as much as £1.3bn.

Sector counterpart Hunting, on the other hand, continued to capitalise on consolidation hopes and its shares gained 9.50p to 784.50p.

Helphire, which suffered after issuing a disappointing update to the market last week, recovered after its directors bought some shares in the company. Chief executive Mark Jackson purchased 60,000 shares at £1.86 per share, signalling confidence in the business and helping the stock climb by 14.68 per cent or 25.25p to 197.25p.

Close Brothers, which fell after announcing the end of takeover talks last week, failed to reverse course. A set of downbeat results, revealing a 29 per cent slump in first half profits, did not help as the company's shares shed 3.49 per cent or 23p to 636p.

Game fared better. The company issued a reassuring trading update, helping recoup some of last week's losses when investors sold the stock following news that two directors, including chief executive Lisa Morgan, had sold shares worth more than £5m.

Game said that it now expects group profit before tax and non-recurring costs for the year to the end of January 2008 to be not less than £74m, which is slightly ahead of the £73m indicated previously. The company's shares closed up 4.75p at 191p.

On AIM, Silverjet gained 2.47 per cent or 0.50p to 20.75p after publishing traffic statistics for February, which evidenced a 10 per cent increase in the load factor from January.

Symphony Environmental Technologies gained 35 per cent or 0.875p to 3.375p, to the top of the AIM-All Share index, after wading into the plastic bag debate. The company issued an unusual regulatory news announcement, welcoming the Prime Minister interest in the subject, but warning that "it is wrong to ban plastic bags altogether, as they are so light, strong, durable, and convenient".

Symphony has been working to create an additive which, according to the company, when added to regular polymers, renders them oxo-bio-degradable or, in other words, causes them to degrade to carbon dioxide, water and biomass within a few months on land or in water.